Tuomey Healthcare pays $72.4 million to avoid $237 million for Medicare fraud case

Tuomey Healthcare System will pay the government for $72.4 million—less than a third of the $237 million that a federal appeals court said it will pay for illegal compensation arrangements with doctors.

As part of the settlement, Tuomey will also be sold to Palmetto Health, a system based in Columbia, S.C. Tuomey previously signaled it planned to partner with Palmetto.

Before agreeing to settle the case, Tuomey had already lost three times in federal court.

In 2013, a federal jury said Tuomey violated the False Claims Act by submitting tens of thousands of illegal claims to Medicare. The jury found that Tuomey paid doctors in ways that rewarded them financially for referring patients to the hospital in violation of the Stark law, tainting the Medicare claims. A federal appeals court upheld that decision in July.

The Stark law, which governs financial relationships between physicians and other providers, has been widely criticized for its complexity, including by federal appellate Judge Albert Diaz, who recently upheld the verdict against Tuomey.

Under the False Claims Act, those found guilty are liable for three times the amount of actual damages as well as financial penalties for each false claim.

Increasingly, alleged Stark violations have been brought to court as False Claims cases, a trend Stephens said he doesn’t see ending any time soon because of the large potential payouts for the whistle-blowers who bring such cases.

The case was originally filed in 2005 by a whistle-blower, Dr. Michael Drakeford, who declined to enter into an agreement offered by the hospital. In successful False Claims Act cases, whistle-blowers are entitled to a percentage of whatever money the government is able to recover. Drakeford will receive $18.1 million from the settlement.